Meltdown makes fund flow to power sector uncertain
Saturday, 14 March 2009
The global economic meltdown has made the expected investment inflow into the country's impoverished power sector uncertain as possible investors might shy away due to the crisis, official sources said, reports UNB.
According to the sources, the government, trying to overcome the funding crunch, is now advancing with a new financing formula under which donor agencies would initially finance the planned projects, which would then be transferred to private sector.
But it is not clear whether the new funding mechanism would click. The Awami League (AL)-led grand-alliance government laid out a plan in its election manifesto that one of its main thrusts would be on improvement of the country's power sector, rendered fragile mainly through reported haggling over work orders for long in the past.
The ruling new coalition promised to increase the power generation to 7,000 MW within next 5 years from the existing production level of 3,500 megawatts to meet an ever-growing demand.
Experts said it would require at least US$ 2.75-3.25 billion only in generation segment to enhance the electricity production.
Similarly, another US$ 3.0 billion will be needed for transmission and distribution purposes to improve the overall power-supply situation. "The total fund requirement will be nearly US$ 6-7 billion to improve the whole sector," said a former chairman of the Power Development Board (PDB).
The grand alliance government's plan was to mobilise most of the requisite funds from the affluent private sector. But the recent economic meltdown has put them into great dilemmas over the funding.
A recent experience from the handing of the 450-MW Bibiyana power project has caused the Power Division officials to get worried and seriously think about the project funding.
They said that very recently when they had invited a tender for the Bibiyana project, none of the major players on the global market had shown any interest in participating in the bidding.
To add to the problem, Malaysian Powertek, which had participated in the recently-cancelled bidding (for Bibiyana), informed the government that it wouldn't now stake a claim in the bidding process because of global fund crisis.
This led the government to defer the tender closing date by another 45 days with the hope of new response.
The Power Cell officials, who invited the tender on behalf of the Power Ministry, admitted the fallout from the global economic crisis and its impact on the project funding.
However, Prime Minister's Adviser Dr Tawfiq-e-Elahi Chowdhury Birbikram, who is looking after the power and energy sector, said that the government is not so worried but moving with an advanced idea. "We're thinking about an alternative way to resolve the fund crisis."
As per the new thought, the government would initially launch power projects with the funds from the international donor agencies like the Asian Development Bank (ADB) and the World Bank for an interim period of time.
After a specific timeframe of two or three years, when the economic recession will go and private funds will be available, those projects would be transferred to private-sector investors.
During the recent visits of different delegations from the ADB and the World Bank, the government broached and forwarded the new idea of funding to the donor agencies.
Dr Elahi claimed that though this is an innovative funding formula, the donor agencies responded positively to the new mode of project funding.
"They have responded very positively. The World Bank has agreed to send a technical team to examine the new funding mechanism," he told the news agency.
He admitted that such a monetary mechanism is a new one, which is never implemented anywhere in the world.
According to the sources, the government, trying to overcome the funding crunch, is now advancing with a new financing formula under which donor agencies would initially finance the planned projects, which would then be transferred to private sector.
But it is not clear whether the new funding mechanism would click. The Awami League (AL)-led grand-alliance government laid out a plan in its election manifesto that one of its main thrusts would be on improvement of the country's power sector, rendered fragile mainly through reported haggling over work orders for long in the past.
The ruling new coalition promised to increase the power generation to 7,000 MW within next 5 years from the existing production level of 3,500 megawatts to meet an ever-growing demand.
Experts said it would require at least US$ 2.75-3.25 billion only in generation segment to enhance the electricity production.
Similarly, another US$ 3.0 billion will be needed for transmission and distribution purposes to improve the overall power-supply situation. "The total fund requirement will be nearly US$ 6-7 billion to improve the whole sector," said a former chairman of the Power Development Board (PDB).
The grand alliance government's plan was to mobilise most of the requisite funds from the affluent private sector. But the recent economic meltdown has put them into great dilemmas over the funding.
A recent experience from the handing of the 450-MW Bibiyana power project has caused the Power Division officials to get worried and seriously think about the project funding.
They said that very recently when they had invited a tender for the Bibiyana project, none of the major players on the global market had shown any interest in participating in the bidding.
To add to the problem, Malaysian Powertek, which had participated in the recently-cancelled bidding (for Bibiyana), informed the government that it wouldn't now stake a claim in the bidding process because of global fund crisis.
This led the government to defer the tender closing date by another 45 days with the hope of new response.
The Power Cell officials, who invited the tender on behalf of the Power Ministry, admitted the fallout from the global economic crisis and its impact on the project funding.
However, Prime Minister's Adviser Dr Tawfiq-e-Elahi Chowdhury Birbikram, who is looking after the power and energy sector, said that the government is not so worried but moving with an advanced idea. "We're thinking about an alternative way to resolve the fund crisis."
As per the new thought, the government would initially launch power projects with the funds from the international donor agencies like the Asian Development Bank (ADB) and the World Bank for an interim period of time.
After a specific timeframe of two or three years, when the economic recession will go and private funds will be available, those projects would be transferred to private-sector investors.
During the recent visits of different delegations from the ADB and the World Bank, the government broached and forwarded the new idea of funding to the donor agencies.
Dr Elahi claimed that though this is an innovative funding formula, the donor agencies responded positively to the new mode of project funding.
"They have responded very positively. The World Bank has agreed to send a technical team to examine the new funding mechanism," he told the news agency.
He admitted that such a monetary mechanism is a new one, which is never implemented anywhere in the world.